State Auditor Releases Audit on Department of Alcoholic Beverage Control

The Office of the State Auditor has released a report on the Department of Alcoholic Beverage Control — Special Financial and Limited Performance Audit For Procedures Performed During Fiscal Year 2016. This report provides recommendations in five performance and financial areas to strengthen Department of Alcoholic Beverage Control (DABC) operations, internal controls, and accounting practices. 

Control State Best Practices. The Office surveyed and compared operational practices between Utah and other alcohol control jurisdictions to identify business best practices and found:

  • DABC has inadequate tracking and evaluating of store level costs
  • Key metrics used by other jurisdictions could benefit DABC
  • Enhanced store performance evaluations could benefit DABC
  • DABC’s warehousing square footage is better utilized than at most other jurisdictions

Staffing Analyses. The Office analyzed DABC’s available staffing data and found:

DABC’s staffing of stores could be more responsible to sales, particularly on weekends. 

  • Feedback to employees can be strengthened. 
  • Hourly wages trend lower than control states but are comparable to the convenience store industry in the West.
  • DABC employee benefits are richer than those for employees within the convenience store industry
  • DABC should continue to develop and expand its product knowledge trainings to strengthen store employees’ expertise.

Product Ordering System. The Office reviewed the use and effectiveness of the product ordering system and found the following:

  • Ordering and stocking of limited product could be improved by use of forecasting tools to replace uninformative out-of-stock reports
  • More frequent monitoring of limited product levels could improve product selection
  • The Product Special Request System appears to be operating effectively

Follow-up of Prior Year Findings. The Office reviewed issues identified in prior year audit reports and found:

  • Certain accounting controls are still not in place
  • Reconciliations still are not occurring as required by DABC
  • Brewery, distillery, and winery reports are still not verified
  • Security guard contracts have been revised to follow IRS guidelines

Financial Reports. The Office performed procedures to verify the accuracy of the information presented in financial reports prepared for the DABC Commission. The Office found that these reports were generally accurate but could be modified to provide the Commission with key performance metrics.

“Ultimately, DABC management lacks the flexibility, data, and tools to achieve the level of operational success we expect,” said State Auditor John Dougall. “DABC retail operations could be improved, by possibly modeling best practices within the convenience store industry. Too often DABC is burdened with legacy government procedures, systems, compensation, and employment practices which impair efficient and effective operations within a control-state structure.”

The report may be found on the Office’s website, auditor.utah.gov, and specifically
http://financialreports.utah.gov/saoreports/2016/16-02DABCFin&PARptAlcoholicBeverageControl,Departmentof.pdf.